Account where overdraft limit can't be breached

HSBC said its Bank Account Pay Monthly, which will be available from April 26, would have a strict overdraft limit, with a 50 buffer zone.

Once this buffer zone had been used, it would not be possible for customers to go deeper into the red, unless they agreed it beforehand with the bank.

People who take out one of the accounts will have to pay a monthly fee of 15, although they will not run the risk of incurring further fees for breaching their overdraft limit.

The account is thought to be the first of its kind in the UK to offer customers the option not to go into unauthorised overdraft.

It will be offered to new customers, while existing ones will be given the option to switch to it, while retaining their existing current account number.

The bank said people applying for the account would be offered a financial review to ensure they understood how the account worked and to make sure it was suitable for them.

It warned that the lack of an unauthorised overdraft facility meant consumers were likely to have more bounced cheques or unpaid direct debits than with other accounts.

However, to help customers manage their money, people will be sent text alerts when they have used 60 per cent, 80 per cent and 95 per cent of their overdraft limit.

HSBC already waives any unauthorised overdraft charges for current account customers if it is the first time they have breached their limit in six months, while people are also not charged if they exceed their limit by up to 10.

The announcement came as the Office of Fair Trading said banks should offer customers the chance to opt out of overdraft facilities, as well as more choice around charging structures.

Basic bank accounts already prevent customers from going overdrawn, but they do not offer the same transactional facilities as standard current accounts.